What does the future hold for the savings market? According to The Savings and Investments Policy project (TSIP), it could all hinge on technological advancement, and a lot of changes could be on the way.
Analysis from TSIP paints a worrying picture of the current savings landscape. A significant savings gap currently exists, with most households not only failing to save enough for day-to-day needs, but also failing to think long term. Their research found that 66% of respondents recognise that they're not saving enough – and 19% don't save anything at all. But it isn't always easy to encourage a savings habit.
Over half (52%) said that they'd like to save or invest more but they couldn't afford to do so, with the most common financial priority for the next 12 months being to 'live day to day' (47%). Almost a fifth (19%) think that simplifying financial products could be a way to encourage saving, so making it easier to access savings vehicles could be crucial.
As such, TSIP wants to "create a culture where it is as easy to save as it is to get into debt", arguing that applying for credit can often take only a few clicks of the mouse, yet securing a savings account can take reams of paperwork, proof of identity and passport checks, something that, while vital for security reasons, could be made simpler. This is where technology could come in.
In its latest report, TSIP has made several recommendations to the Government to improve long-term savings levels and build an industry culture that's focused on savers, and one of these is to develop a 'digital passport'.
TSIP argues that there's a clear need to improve accessibility to savings and investment products so it's easier for consumers to open accounts, buy products, transfer funds and view a complete picture of their savings position, something that a digital passport could achieve.
The idea of the passport is to centralise information in a standardised, industry-wide way to prevent excessive requirements of customers. Essentially, when opening a new account, consumers could direct providers to their digital record, rather than needing to send their actual passport and contend with too much paperwork.
Making greater use of this kind of technology could make saving easier for consumers, a key way to encourage the savings habit. It could even mean consumers are more in control of their financial affairs and will allow them to maintain up-to-date records with all providers, and TSIP says it could even minimise the potential for fraud, so security concerns won't be much of an issue.
The passport has the potential to make a huge difference to not only consumer behaviour, but also to the market as a whole. A quarter of those surveyed said they'd start saving if they were offered an explicit financial incentive to do so, something that largely depends on improving savings rates, and arguably, removing the barriers to saving could drive that improvement.
The assumption is that if switching savings accounts or transferring ISA funds became easier, competition in the market would have to increase. Providers couldn't simply rely on consumer apathy as savers would actively look for better alternatives and wouldn't hesitate to switch, meaning rates would have to be increased to encourage both loyalty and new business.
The digital passport could therefore encourage competition and lead to better rates, while making those rates more accessible to savers – and ultimately, it could start to bridge the savings gap to ensure people have the level of savings they need for the long term, as well as for everyday life.
Sylvia Waycot, editor of Moneyfacts.co.uk, commented on the proposal: "The simple act of making it easier to open a savings account and being able to transport it to another provider with the upmost of ease, will probably do more to encourage savings rate competition than any other recent initiatives. And to be honest, it's about time that opening a savings account was as easy as it is to borrow money, so let's hope the proposals become a reality soon."
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